well, looks like i have your solution.
it seems that the problem is indeed the password function. what needs to be done is you need to update your user in MySQL with the OLD_PASSWORD() function. however, i dont think this can be done by you.
read this thread, it is the same as your problem:
Run mysql and login as root:
Then, paste the following command, editing as necessary, to change the password of the user to the old format.
After you have set the passwords to the old format, flush the tables.
UPDATE mysql.user SET password=OLD_PASSWORD('somepassword') WHERE user='someuser' AND host='somehost';
Then exit the mysql client with "quit".
i think you need to contact godaddy, because i am pretty sure you dont have the required permissions to perform the above operations, since they require root priveleges.
so, contact godaddy. sorry